Customers and banks: Why can’t they all get along?

Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

In the continuing saga of gauging the perceived satisfaction of customers with their financial institutions, the latest indications are, simultaneously, mixed, predictable, sometimes disappointing … and sometimes promising.

One unifying thing that has emerged quite clearly from this miasma is this:

Customers in general, and millennials in particular, respond most positively to practices that cater to their particular circumstances, rather than simply being urged to buy products.

Deep breath. Now let’s plunge in …

Mixed findings

Start with the mixed: J.D. Power Ratings recently encapsulated its 2016 benchmark research, insights, and analyses of more than 83,000 consumer responses and studies, as well as a pulse survey. In a nutshell, it says in a report issued March 1:

“Retail bank, mortgage, and financial services firms have been enjoying a five-year trend of consistently improving customer satisfaction and loyalty scores, but the perception of excessive sales pressure could erode their customers’ goodwill.”

“It may be surprising to some, but customers continue to put faith in their banks, as 79% of customers believe their bank acts in their best interest. However, as we continued to dig deeper into the issue, it became clear that an intense sales culture at some banks may indeed be driving short-term growth, but it can erode loyalty and lead to a loss of future revenue. Banks must foster a customer-centered culture where they focus on meeting needs and providing relevant advice rather than just selling the next account.”

More mixed: Fiserv Inc. sponsored a Harris Poll survey of more than 3,000 U.S. banking consumers last year and recently posted its findings. Summarizing again, it says:

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“The survey confirms that consumers use a blend of digital and traditional channels to manage their finances and make payments, with millennials accessing mobile banking nearly three times more than other generations. While consumer satisfaction remains high when it comes to primary financial organizations, with 76% rating them an eight or higher on a scale of zero to ten, many consumers express less satisfaction with their financial health compared to other areas of life.”

Fiserv’s COO, Mark Ernst, similarly put a sharper point on this:

“The latest survey underscores the day-to-day concerns about money that still loom large for consumers, even as there are more options available than ever before in how they can manage their finances. For banks, credit unions, and billers, this is an opportunity to go beyond offering products to creating experiences that are essential to people’s lives, anticipating their needs, and giving customers control and confidence in their financial futures.”

Topics that emerged top of mind for consumers in this survey include an accelerating shift toward self-service, particularly through online and mobile channels, and increasing and/or adopting new, more powerful, and more convenient forms of security protection, such as through biometric methods.

Now to the predictable

A Juniper Research study forecasts that by 2021, nearly 3 billion users globally will access retail banking services via smartphones, tablets, PCs, and smart watches, up 53% from last year’s forecast. The prediction is derived partly from an observation that “usage will continue to rise as consumers increasingly opt for banks offering the convenience of rapid, multichannel digital services.” Along with this will come the need “to focus on providing a more frictionless digital experience to [bank] customers.”

Adds Nitin Bhas, research author at U.K-based Juniper Research:

“Technology is currently the big differentiator for all types of banks, including traditional banks and the so-called challenger banks. Investments in banking technology reached record levels in 2016 and traditional banks are expected to focus on digital transformation initiatives.”

The results of Mastercard’s fifth annual digital payments study, recently released, are fairly predictable but instructive. March Cohen, vice-president of digital communications at Mastercard, says: “Technology is making the promise and the potential of a less-cash life a reality for more people every day. This year’s study notes a change in the level of interest for new ways to shop and pay that only a few years ago would have seemed farfetched.”

Specific technologies mentioned most often were: Increased acceptance of digital wallets; activation of artificial intelligence and smart home assistants; wearables; internet of things; and new security features such as facial recognition, fingerprint and touch recognition, and getting rid of passwords.

Now to the disappointing

Javelin Strategy and Research recently issued a study that found that, in account-opening transactions, “digital channels are still flawed, with few applicants enjoying a start-to-finish process in the online or mobile (smartphones and tablets) channels. With the heightened risk of abandonment every time an applicant switches channels, financial institutions need to work toward an integrated, satisfying, multichannel experience.”

It found that about 34% of successful applicants opened and completed the application process online, while the other 66% turned to another channel at some point. Mobile netted only 8% of successful applications with a start-to-finish process.

“No banker would find it acceptable to tell a prospective customer who walked into a branch, ʻI’m sorry, but you must drive to a branch across town to open the account you want.’ Yet that is effectively the message consumers get when they seek to open accounts in digital channels but learn that they’re unavailable or that the process is too complicated to be completed in a satisfying manner,” says Mark Schwanhausser, director of Omnichannel Financial Services, Javelin Strategy and Research.

Another bit of disappointment: It seems small businesses express a poor opinion of mobile banking as it might apply to them. RateWatch and Simon-Kucher and Partners surveyed 215 relatively small businesses (of up to $4.9 million in annual revenues). Key findings: 34% have never used mobile banking, even though their financial institution offers it, and 69% do not have a positive perception of mobile banking services offered by their institutions.

“The small business customer is a huge untapped market for financial institutions,” says Jamie Zussman, business development associate for Ratewatch.

Adds David Chung, director at Simon-Kucher and Partners: “We need a systematic and structured approach to designing, pricing, and selling mobile banking solutions. When these steps are managed separately, we find suboptimal products that fail to meet revenue and profit goals, and fall short of addressing customer needs.”

Finally, the promising

CFI Group’s annual Bank Satisfaction Barometer shows an increase in overall customer satisfaction from 2015 to 2016, rising three points to 82 on a 0-100 scale.

It identified four opportunities for banks to focus their customer service efforts: Engaging local communities, enhancing loyalty programs, promoting digital experiences, and developing millennial customers. (More on the millennials in a bit.)

Another promising indication: Celent has sponsored an ongoing model bank awards program, and in a series of blogs, has noted aspects and trends common to the most innovative of bank entrants.

Patty Hines, senior analyst at Celent, blogs about the award’s product category. She noted these aspects appearing in prospective model banks: Modernized banking and payments infrastructure; faster and more convenient small business lending practices; new systems to boost payments, remittances, loan disbursements, and ecommerce refunds; and partnerships with startup fintech firms.

Similarly, Joan McGowan, another Celent senior analyst, blogs about the award’s fraud and risk management categories, as well as process automation. In the applicants she has judged, she points out progress in the use of agile technology, digital process automation, and cross-organization consistency. Also, improved data analysis and machine learning capabilities have figured prominently.

All of these, she summarizes, lead to one, all-encompassing imperative: “Hopefully, no flubs on the big day.”

Okay, another deep breath. It can be argued that all of the above, realistically, boils down to this: millennials. Really. They are the new baby boomers, who once ruled everything, including retail banking. Now, believe it or not, millennials have teenage kids themselves (Gen Z), have mortgages, have careers, and, most important, have distinctive expectations regarding acceptable service levels.

David Lester, managing director and finance lead at Brightworks Interactive Marketing, and author of two finance books, in a communication with Banking Exchange, offers this list of how banks can entice millennials into their doors (digitally and in person):

• Money geniuses—“If banks had approachable money geniuses that would demonstrate tactics and strategies in a nonthreatening and fun way, branches would be packed like Apple stores.”

• Online community help—“Millennials instantly go to the internet to find solutions to their problems. You can watch a YouTube video on how to do just about anything. Why not be able to learn about ETFs vs. mutual funds?”

• Social customer service—“Why not take community management to the next level and allow customer service representatives to do simple tasks like transfer money, remove holds, or change reoccurring payments from monthly to weekly through direct messages?”

• Goals and values vs. products—“Clients should be met by a money coach to help them identify what their goals, values, and beliefs are towards money.”

• Celebrate success—“At Apple they celebrate when someone buys their first iPhone. Why don’t banks celebrate and bolster support for people who are achieving financial freedom by paying off their credit cards or mortgages?”

Lester summarizes this—as well as, in a way, all of the above—like this:

“The future of banks should be like a Home Depot for finances. We can show you how, cheer you on while you do it yourself, or be there for the hard stuff to take your hand when you need it.”

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.